Fixed Vs Variable Mortgage Rates

Fixed Vs Variable Mortgage Rates In 2022: Which One is Right for You?

Fixed Mortgage Rates: An Overview

When it comes to getting a mortgage, the first decision to make is whether to get a variable or fixed rate. A fixed mortgage rate is fixed, invariable and provides certainty, while a variable mortgage rate comes with lower interest rates. Fixed mortgage rate remains the same for a set period, but as the term lengthens, the interest rate increases. The term can range from 6 months to up to a potential 10-month period, but the interest rate must be considered. This will result in a high interest rate compared to a variable mortgage rate, which offers flexibility and lower rates. A constant debate between fixed vs variable mortgage rates can easily be resolved by involving an experienced mortgage broker who will provide you with details of to help you make an informed choice.

Variable Mortgage Rates: Understanding The Basics

Variable mortgage rates vary based on the interest rate you pay, which can go up or down in line with the prime interest rate. In such a scenario if the interest rate goes up, you will be paying less toward the principal amount and more on the interest. If the interest rate goes down, you will be paying off your mortgage earlier than anticipated as more will be paid back in terms of your principal amount. It adjusts with the market rate and varies over time. Many brokers are more oriented towards variable interest due to its flexible nature that often helps the borrower to pay back the mortgage in less time than they expect to do so in. The fixed rate vs variable rate is often different for everyone based on their financial position.

Fixed Mortgage Rates: Note Down the Pros & Cons

The choice of mortgage rates is crucial when taking out a mortgage. Either you become the successful owner of your own house, or you get sucked into an endless cycle of debt that you will never be able to escape. We will provide you with a brief comparison of the pros and cons that can help make up your mind in a better manner if you are stuck between fixed and variable rates.

Following are the pros and cons of fixed mortgage rates:

The Pros

  • Your interest rate remains constant. It does not vary with the market trend.
  • You can easily predict and calculate monthly mortgage payments based on the fixed mortgage rate and thereby the amount you must pay each month.
  • Improved financial planning.

The Cons

  • You will be paying more interest rate than the variable mortgage rate.
  • You will not be able to modify your interest rate if you encounter financial difficulties.

Variable Mortgage Rates: Mark the Pros & Cons

It does not matter whether the mortgage interest rates are fixed or variable, each of them has their own advantages and disadvantages. The fixed mortgage rate we have discussed above, we will now focus on variable mortgage rate and how it fluctuates in or against your finances.

Given below are pros and cons of the variable mortgage rates:

The Pros

  • The initial interest rate is lower
  • If the interest rate declines in the market, then it declines for you as well.

The Cons

  • With fluctuating interest rates, there is a possibility you might be paying more interest rate as compared to a fixed mortgage due to the market trend in the interest rates.
  • Less payments are sent to the principal if the interest rate rises and more on the interest and hence extending the mortgage payment time.

A Comparison of Fixed vs Variable Rate Interest

Factors
Fixed Mortgage Rate
Variable Mortgage Rate

Certainty

Provides Certainty

Uncertain as rate fluctuates with market

Predictability

Easy calculations due to fixed payments.

Calculations keep changing due to varying

Negotiation

Less flexibility when it comes to ability to negotiate

Easy to negotiate and adjust payments

Choosing between Fixed vs variable: Which One Is Right for You?

It is still very natural if you are stuck between choosing the type of mortgage rate between fixed and variable. While the fixed mortgage rate provides you a long run of financial estimations, the variable interest rate often helps you become a homeowner sooner than you would expect. Now there is no fixed solution to identify the type of mortgage rate you should follow. It depends on the financial planning you have done to come this far. The savings, the down payment you are ready to pay and the risk tolerance you have in case anything goes wrong.

Can You Switch from Variable to Fixed Rate Loan: Find Out?

Is it possible that you might be interested in making a switch from variable to fixed mortgage rate and wondering how it will impact your mortgage payments? The very basic change you should be expecting is the increased mortgage rate. It is going to be higher as compared to the variable mortgage rate, but you might end up having a better financial future due to the predictable monthly expense that you must put out from your earnings.

Still Wondering Which One Is Right for You? Get Help from a Trusted Mortgage Broker

Even though the pros and cons are mentioned here, the possible impact on the future of your financials is given, you still might be confused. And this is normal behavior. You need guidance and counseling from the experts of the field. You require the support of a trusted mortgage broker who will sit with you, go through your financials, draft you a possibility and then present to you the options you have. It is important that you encounter the best of the fields and if you are reading till here, you can contact us here for an expert opinion on the matter. You can also drop in your email here for us to reach you out and see how we might be able to help you. We become the link between you and the word of mortgage through our extended network and provide you with the most efficient mortgage plans possible. It is our goal to provide customer satisfaction through our work.

Give us a call today (416) 894-3976 or send us an email at info@snmortgage.ca

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